London remains top city to do business

Latest study of global financial centers reports little difference between London, New York and Hong Kong, as Asian cities swell the chasing pack

London has once again topped the list of financial centers in the Global Financial Centres Index, a ranking of the top 75 cities in which to do business. The ninth edition of the twice-yearly Index, published by think tank, Z/Yen, puts London ahead of New York, in second place, and Hong Kong, third, across all of its five key areas of competiveness: people, business, environment, market access, infrastructure and general competiveness. According to the study, however: ‘there remains no significant difference between London, New York and Hong Kong… respondents continue to believe that these centers work together for mutual benefit.’ The results are based on a survey of financial services professionals, who report an overall drop in confidence.

Behind the traditional top three, the positions at the top of the index are increasingly being taken up by other Asian cities. In the first report in March 2007 there were only three Asian cities in the top 20. Four years later there are eight (North America has six, Europe five). Moreover, the cities thought to become more significant over the next few years were all Asian: Shanghai, Singapore, Seoul, Hong Kong and Beijing.

But there are also movements within this group. Seoul enjoyed the largest jump in the index, moving into 16th place. Despite the rising tensions between North and South Korea, the report attributes Seoul’s rise to the city’s promotion as a financial center. Singapore, however, dropped points compared to last year, although it comfortably held on to fourth position behind Hong Kong and ahead of Shanghai.

But London should not rest on its laurels, warns the report. Curbs on bankers’ bonuses and a ‘profit tax’ on banks are the top threats to the UK capital’s continuing supremacy, a concern highlighted by a YouGov poll cited by the report, which suggests 43 percent of respondents have considered leaving London and 11 percent are either definitely departing or likely to do so soon. Summarizing these concerns in the report, Sir Michael Snyder, chairman of the UK government’s Professional and Business Services Group, says: ‘Uncertainty over tax and regulation is a major concern to financial institutions based in London or indeed those contemplating being here.’

The next UK budget is due on Wednesday and it is expected to go some way toward meeting Sir Michael’s call for ‘clarity and certainty on taxation’. As part of his annual financial and economic statement to Parliament, UK Chancellor, George Osborne, is expected to announce a clarification of the taxation of companies’ overseas profits - a move to encourage tax-exiled companies to come back to the UK. It is rumored that the advertising giant, WPP, will announce its return to the UK to coincide with the budget. The company, headquartered in London and tax-resident in Ireland, is headed by Martin Sorrell, a member of prime minister David Cameron’s business advisory panel. Other companies who have left the UK in recent years include Informa, Shire, Regus and United Business Media.